Loren Steffy: BP's real punishment is from stock market

BP's real punishment is from the stock market

If you're looking for justice in the Gulf of Mexico oil disaster, you're likely to be disappointed.

Public outrage at BP is at a fever pitch, but don't expect to see executives in chains, camera-ready perp walks or a high-profile trial.

While executives may have made mistakes, it's unlikely they engaged in criminal conduct.

If BP and its partners in the well face any charges at all, it would probably be under federal pollution laws. Even the biggest fines levied under those laws, though, would be a rounding error on the money BP is paying to clean up the mess.

That's what happened after BP's Texas City refinery explosion in 2005. The feds charged BP with a violation of the Clean Air Act.

A BP subsidiary pleaded guilty to a felony, paid a $50 million fine and accepted three years of probation.

The fine was the biggest ever imposed under the law, but it was minuscule compared with the more than $2 billion BP spent to settle lawsuits and upgrade the refinery.

Brent Coon, Rowe's lawyer, has tried to get BP's probation revoked, but even that isn't likely. This time, BP polluted the water and land, but not the air.

Tools not up to the job

The government, in other words, is left with inadequate tools — low-ball fines and plea deals - to change corporate behavior.

That, too, we have seen before. In late 2001, the feds faced another firm that stubbornly refused to change: the accounting firm Arthur Andersen.

Andersen was Enron's auditor, and by the time the energy trader collapsed, Andersen had already paid record Securities and Exchange Commission fines for blown audits at Sunbeam and Waste Management. In each case, those involved were promoted and rewarded.

"At the time of the Enron meltdown, they were under a probation period with the SEC for the Waste Management case," said Sam Buell, who led the Andersen prosecution and who's now a law professor at Washington University in St. Louis. "If you just did another SEC proceeding, you'd just be saying the same thing again - 'OK, now don't do it again.' "

So the feds opted to press a criminal case, trying to reach a deferred prosecution agreement. That failed, and the government wound up indicting the firm, which effectively killed it. Andersen was later convicted, and the conviction was overturned by the Supreme Court because of improper jury instructions, but by then, the firm was long gone.

As an auditor, trust was essential to Andersen's business. With the indictment, clients fled. With an oil company, though, the threat of an indictment or conviction has less impact.

BP, after all, is already a corporate felon. That didn't scare away customers or drilling partners, nor did it prevent BP from getting drilling permits in the Gulf.

"It can be difficult to get the attention of firms the size of BP," Buell said. "You're not going to put these guys' business on the line with environmental law."

In other words, the threat of punishment wasn't, and still isn't, enough to change BP's behavior, to prevent yet another tragedy from unfolding on its watch.

The market speaks

This time, investors are fleeing in droves, and BP's shares have lost half their value. Its market share has fallen by about $100 billion since the well in the Gulf blew out on April 20. BP's future as a stand-alone company remains an open question.

It may not quell the public anger, but in this disaster, the closest thing to justice is being meted out by the market.